Marijuana tax in Louisiana could add $128 million in revenue, report says

A demonstrator waves a flag with marijuana leaves on it during a protest calling for the legalization of marijuana outside of the White House, in Washington, Saturday, April 2, 2016. During the rally protesters demanded President Obama use his authority to stop marijuana arrests and pardon offenders. ( AP Photo/Jose Luis Magana)

(Jose Luis Magana)

Louisiana could earn as much as $128 million in annual revenue if it were to legalize and tax marijuana, according to a Washington, D.C., think tank's new report.

The Tax Foundation, a nonprofit research organization most often described as conservative and pro-business, based its calculations on current demand for pot in Colorado and Washington, states that have authorized recreational use along with Oregon and Alaska. Ten more states have proposed ballot measures to legalize pot commerce, and Vermont's legislature is considering one.

The report notes that Colorado, Oregon and Washington are moving to reduce taxes on marijuana after seeing that legalizing pot did not curb demand for "black market" purchases. They started with a 30 percent tax; Colorado's will fall to 27 percent next summer, and Oregon's will reach 17 percent by the end of this year.

Based on ballot proposals and legislation under consideration, states are placing the tax rate on marijuana between 10 percent and 25 percent, Despite the lower tax trend, the Tax Foundation calculates that states are missing out on at least $5.3 billion in taxes all told.

If Louisiana were to legalize pot and place a 15 percent tax on sales, it could see $77 million in revenues annually, according to the report. With a 25 percent tax, collections would increase to $128 million.

The Tax Foundation offers some warnings in the conclusion of its report. It says that legalizing marijuana will not eradicate black market sales, especially if the tax rate is on the high end. In addition, it cautions governments against expecting an immediate tax windfall.

"While the revenue can be in the tens or even hundreds of millions of dollars, it takes a lead time to develop. Estimating the size of an illegal market is difficult, as is estimating how many consumers will switch to the legal market when it is available. Revenues started out slowly in Colorado and Washington, both as consumers became familiar with the new system and after state and local authorities spent time and money setting up new frameworks and regulatory infrastructure," the report said.